The price is understood on both sides to be either repossession of the property if it's a secured loan, or attempts to collect that still have to stay, under present law, on the legal side of harassment. Credit rating agencies exist to tell potential creditors about who's good and who's not good for the money they get lent. It of course is based on history, so it can, just like that thing called technical analysis, wind up being unable to predict the future terribly accurately. But on the whole, it works as intended. Financial and non-financial businesses both have an accounting line on their books for bad debts. Somehow the capitalist system has managed not just to survive, but to thrive with the idea that a certain amount of risk is inherent in the process of giving credit. Once again, something that I would have thought would be blindingly obvious. On ET, apparently not.
How would jail time be a disincentive to an entrepreneur who actually was bringing something of value to the market? It would only be a disincentive to the marginal (as I said in my original response) entrepreneur who was unlikely to succeed. Those entrepreneurs would self-select against taking out loans, which would mean that banks would never have to even decide whether to give them a loan or not. The fact that those marginal entrepreneurs, who ultimately fail, get loans now only confirms what economists have been saying for a long time about information asymmetries, i.e. the entrepreneurs likely know they are going to fail, but want to try anyway, and are able to put forth a convincing enough story to get the loan. If the entrepreneur knew that the penalty for exploiting this asymmetry was jail, they'd be less likely to indulge in it. Sorry that the Econ 101 class you took didn't delve deep enough into these issues. Maybe next semester...
...and under current law that's not an option. Hasn't been in the West since the nineteenth century, and since then the West has gotten considerably richer than it was, logic_man's ridiculously puerile screed notwithstanding. These people are being jailed because of a loophole in the law.
One could just as easily say the West has gotten richer despite those laws, due to the exponential growth in overall productivity created by the various technological revolutions and that had the laws in place prior to the 19th century remained in place, it would have been richer still. But, we're not talking about Biblical times or the 19th century, we're talking about today. If those laws don't make sense today, who gives a flying fig if they made sense 100 or 2500 years ago?
laugh if you want, but you're the one living in that jungle they call Manhattan. Somewhere there is a real man (not a city wimp) living in a grass hut with nothing on his to do list but to go hunting or fishing.
Yeah, well, maybe if you were more intelligent, you'd realize that beyond a certain point, nothing is "blindingly obvious". Maybe using rhetorical tricks like calling one's position "blindingly obvious" works with the crowd you usually interact with, but I'm generally indifferent to such linguistic legerdemains. Prove your point logically or assume that it isn't proven at all.
Hmm...grass hut on one hand, air conditioned skyscraper on the other. Yeah, I'm going to go with the air conditioned skyscraper as evidence of the more advanced society. Jeez, Rousseau really got to you people with that whole "noble savage" thing, didn't he? There's a reason my ancestors gave up that whole way of life. The reason is it sucked.